To Complete Performance Index TCPI in Project Cost Management

Forecasting the cost performance is vital for controlling project costs and improving the project performance. The To-Complete Performance Index (TCPI) is a tool that helps project managers control the project cost.

The TCPI helps project managers find budgetary deviations before they occur. TCPI is a relatively new term and popularized by the PMBOK Guide. This excellent tool helps project managers calculate the future cost performance of the project.

Today’s blog post will discuss TCPI in detail, its formula, examples, and how to use it in project management to control costs.

What is TCPI (To-Complete Performance Index) in Project Management?

The To Complete Performance Index (TCPI) is the cost performance index for the remaining work you must meet to complete the project on a budget (BAC or EAC).

Put simply, the To Complete Performance Index estimates the future cost performance you may need to complete the project within the approved budget.

According to the PMBOK Guide, “TCPI is the calculated Cost Performance Index that is achieved on the remaining work to meet the specified management goal, such as the BAC or the EAC.”

TCPI shows the variations in the cost performance in the future course of action; you can see how much adjustment you need to stay inside the budget. 

TCPI = (Cost Required to Complete the Residual Work) / (Remaining Budget)

The ratio can be one, less than, or more than one.

The interpretation of this ratio is as follows:

  • If TCPI = 1, you can complete the project with the existing budget.
  • If TCPI < 1, you will complete the project under budget.
  • If TCPI > 1, you will exceed the existing budget.

TCPI Formulas

tcpi to complete performance

To understand the TCPI formula, let us know the parameters used in the formulas:

EV = Earned Value

AC = Actual Cost

BAC = Budget at Completion

EAC = Estimate at Completion

You can calculate the TCPI by dividing the remaining work by the remaining funds.

TCPI = (Remaining Work) / (Remaining Funds)

You can calculate the remaining work by subtracting the Earned Value from the total budget.

Remaining Work = Total budget – Earned Value

= (BAC – EV).

You can find the remaining funds in two cases: when you are under budget and when you are over budget.

The To Complete Performance Index formula will be different in both cases.

Let’s discuss these two cases.

Case-I: You Are Under Budget

Here, you will calculate the remaining funds by subtracting the “actual cost incurred to date” from the “initial budget.”

The remaining funds = Budget at Completion – Actual Cost

= BAC – AC

The TCPI formula will be

TCPI = (BAC – EV) / (BAC – AC)

Case-II: You Are Over Budget

Here, you will calculate the remaining funds by subtracting the actual cost incurred to date from the Estimate at Completion.

The remaining funds = Estimate at Completion – Actual Cost

= EAC – AC

Here, the TCPI will show you the required cost performance to complete the project with the newly calculated budget.

TCPI= (BAC – EV) / (EAC – AC)

Example of TCPI Calculation (Using BAC)

You are working on a project to be completed in 24 months. The BAC of the project is 200,000 USD. 12 months have passed, you have spent 110,000 USD, and 60% of the work has been completed.

Find the To Complete Performance Index (TCPI) for this project.

Given in the question:

Budget at Completion (BAC) = 200,000 USD

Actual Cost (AC) =110,000 USD

Planned Value (PV) = 50% of 200,000

= 100,000 USD

Earned Value (EV) = 60% of 200,000

= 120,000 USD

Cost Performance Index (CPI) = EV / AC

= 120,000 / 110,000

= 1.1

Since the Cost Performance Index is 1.1, which is greater than one, you are under budget. Therefore, in this case, you will use the TCPI formula based on the BAC.

TCPI = (BAC – EV) / (BAC – AC)

= (200,000 – 120,000) / (200,000 – 110,000)

= 80,000 / 90,000

= 0.89

This means that you can continue with a Cost Performance Index of 0.89 to complete the project.

Example of TCPI Calculation (Using EAC)

You have a project to be completed in 12 months. The project budget is 100,000 USD. 6 months have passed, and you have spent 60,000 USD, but on closer examination, you find that only 40% of the work has been completed so far.

Find the To Complete Performance Index (TCPI) for this project.

Given in the question:

Budget at Completion (BAC) = 100,000 USD

Actual Cost (AC) = 60,000 USD

Planned Value (PV) = 50% of 100,000

= 50,000 USD

Earned Value (EV) = 40% of 100,000

= 40,000 USD

Cost Performance Index (CPI) = EV / AC

= 40,000 /60,000

= 0.67

Hence, the Cost Performance Index (CPI) = 0.67

Since the Cost Performance Index is less than one, you are over budget. Now, you will calculate the new Estimate at Completion and use a formula based on the EAC.

Estimate at Completion (EAC) = BAC / CPI

= 100,000 / 0.67

= 149,253.73 USD

Hence, the Estimate at Completion (EAC) = 149,253.73 USD

Now, TCPI = (BAC – EV) / (EAC – AC)

= (100,000 – 40,000) / (149,253.73 – 60,000)

=60,000 / 89,253.73

=0.67

TCPI = 0.67

This means that you can continue with a Cost Performance Index of 0.67 to complete the project.

If you have calculated the Estimate at Completion using the Earned Value Management formula (EAC = BAC / CPI), the TCPI will be equal to the CPI when you calculate the TCPI the first time. This is because you have assumed that the future cost performance of the project will be the same as the past while calculating the Estimate at Completion (EAC).

CPI Vs TCPI

CPI is the cost performance index for the project, and TCPI also provides the project cost performance. You might wonder what the difference between the two concepts is. 

CPI provides the past and current cost performance, while TCPI provides the future cost performance of the project.

The formula to calculate CPI is as follows.

CPI = EV/AC

The Formulas to Calculate TCPI are as follows:

TCPI = (BAC – EV) / (BAC – AC)

And,

TCPI = (BAC – EV) / (EAC – AC)

CPI and TCPI complement each other and are part of the performance report. They show where the project is and what needs to be done to complete it and achieve its objectives without deviating from the project baselines.

TCPI Vs ETC Vs EAC

TCPI provided the required efficiency to meet project goals by calculating the ratio of remaining work to the remaining budget.

ETC (Estimate to Complete) estimates the additional cost required to finish the remaining project work by subtracting actual costs from the total estimated cost. 

EAC (Estimate at Completion) provides a projection of the total project cost based on current performance and estimates for remaining work.

The following table shows the key difference between these three forecasting terms:

to complete peformance index tcpi table

A Real-World Example of TCPI

Suppose you have a project to paint 10,000 square feet in 10 days. This means you have to paint 1,000 square feet per day.

When you review your progress halfway through, you find that only 3,000 square feet have been painted.

You have five days left and 7,000 square feet yet to be painted. You calculate that you will have to paint 1,400 square feet daily to complete the task within ten days. This must be your future performance to complete the task on time. This future performance is the To Complete Performance Index (TCPI).

The Cost Performance Index (CPI) is your past performance, and the TCPI is the future performance you must meet to complete the project within the approved budget.

You can also calculate what will happen if you paint 7,000 square feet to this date. This means you now have to paint 3,000 square feet in 5 days. Here, you can paint 600 square feet daily to complete the task, which is a more comfortable goal.

Before concluding this post, let’s revisit a few key points:

  • CPI is the past cost performance of the project, and TCPI is the future cost performance of the project.
  • If you are under budget, you will calculate the TCPI based on the BAC.
  • You will calculate the TCPI based on the EAC if you are over budget.
  • If the To Complete Performance Index is less than one, you are in a comfortable position.
  • You have to perform better than the past cost performance if the To Complete Performance Index exceeds one. You can continue with the same cost performance if the To Complete Performance Index equals one.

Summary

The To-Complete Performance Index is a forecasting tool that helps you determine the future cost efficiency of the project. It tells you how effectively you should use your resources to complete the project on budget. It is good if the TCPI is less than one, while the reverse is true with performance indexes: if the indexes are greater than one, it is good for the project.

The TCPI concept is important from a PMP exam point of view.

This blog post is the last in eleven series on earned value management and project forecasting. Please read through my earlier blog posts before reading this post if you’re coming here from a search engine or a referral.

The following are the links for other blog posts:

This topic is important from a PMP exam point of view.

Have you used the To Complete Performance Index (TCPI) in your project? Please share your experience in the comments section.

Fahad Usmani, PMP

I am Mohammad Fahad Usmani, B.E. PMP, PMI-RMP. I have been blogging on project management topics since 2011. To date, thousands of professionals have passed the PMP exam using my resources.